Making Sense Of MGM Resorts Decision To Sell Circus Circus And Lease Back Bellagio

by Trefis Team
MGM Resorts International
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MGM Resorts (NYSE: MGM) is a holding company that owns and operates casino resorts, which include gaming, hotel, dining, entertainment, retail, and other amenities. Per recent filings, MGM operates 9 properties in Las Vegas, 2 properties in Macau, and 8 properties in other regions of the U.S. In October, the company announced the sale of Bellagio and Circus Circus, two prominent properties in Las Vegas. But more recently, it decided to lease back Bellagio.

Trefis analyzes the key reasons for the divestiture in an interactive dashboard, Why Is MGM Resorts Selling Circus Circus Las Vegas And Leasing Back Bellagio? and finds that while the decision to sell the two properties can be attributed to stagnating revenues across the Las Vegas strip, its decision to lease Bellagio can be traced to the property’s strong margin.

A Quick Look at MGM Resorts Revenues

MGM Resorts reported $11.7 billion in Net Revenues for full-year 2018. This includes five divisions:

  • Casino: $5.7 billion in FY2018 (48% of Net Revenues). It includes income from regulated gambling activities at the company’s properties. MGM China, Regional Operations and Las Vegas properties contribute 39%, 36% and 25% of the casino revenues, respectively.
  • Rooms: $2.2 billion in FY2018 (19% of Net Revenues). It includes income from visitors/tourists who lodge in the company’s properties. Las Vegas and Regional properties contribute 80% and 14% of the room revenues, respectively.
  • Food and Beverage: $1.9 billion in FY2018 (17% of Net Revenues). It includes income from food and beverage sales at the company’s properties.
  • Entertainment and Retail: $1.3 billion in FY2018 (11% of Net Revenues). It includes income from retail stores and live performances at the company’s properties.
  • Corporate and Other: $662 million in FY2018 (5% of Net Revenues). It includes income from unconsolidated affiliates such as CityCenter Holdings.

What Happened?

  • MGM Resorts announced the sale of Bellagio and Circus Circus in October.
  • Interestingly, Bellagio is to be leased back from Blackstone REIT whereas Circus Circus is to be sold.


  • Comparing the last three years’ performance of Circus Circus and Bellagio with the other Las Vegas Strip properties, Circus Circus’ EBITDA margin is 5-percentage points lower than the average.
  • However, Bellagio is the second-most profitable property after New York-New York.

So What?

  • Vegas Strip properties contribute nearly 50% of the company’s total revenues and have been reporting a lukewarm performance in the past three years.
  • In Q3’19, the share of Las Vegas Strip further declined to 45% of the total revenues, primarily due to the acquisition of new regional properties and strong growth in Macau.
  • As a part of MGM2020, the company aims to achieve a $200-million increase in EBITDA with a new operating model.
  • Property sales would reduce MGM’s debt burden of $15.1 billion and further its asset-light strategy.
  • Considering a low EBITDA margin of the Mirage and Mandalay Bay, Trefis expects these to be possible targets for divestiture in the coming years.

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